People v.

Concepcion
G.R. No. 19190 (November 29, 1922)

FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a co-
partnership. Defendants wife was a director of this co-partnership. Defendant was found guilty of
violating Sec. 35 of Act No. 2747 which says that The National Bank shall not, directly or indirectly, grant
loans to any of the members of the Board of Directors of the bank nor to agents of the branch banks.
This Section was in effect in 1919 but was repealed in Act No. 2938 approved on January 30, 1921.

ISSUE:
W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed by
Act No. 2938.

HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to the intention of
the Legislature. Section 49 in relation to Sec. 25 of Act No. 2747 provides a punishment for any person
who shall violate any provisions of the Act. Defendant contends that the repeal of these Sections by Act
No. 2938 has served to take away basis for criminal prosecution. The Court holds that where an act of
the Legislature which penalizes an offense repeals a former act which penalized the same
offense, such repeal does not have the effect of thereafter depriving the Courts of jurisdiction to try,
convict and sentence offenders charged with violations of the old law.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.

GUARIA AGRICULTURAL AND REALTY DEVELOPMENT CORPORATION, Respondent.

G.R. No. 160758 January 15, 2014

PONENTE: Bersamin, J.

TOPIC: Contracts, Delay

FACTS:
 In July 1976, Guaria Corporation applied for a loan from DBP to finance the development of its
resort complex. The loan, in the amount of P3,387,000.00, was approved on August 5, 1976. Guaria
Corporation executed a promissory note that would be due on November 3, 1988. On October 5, 1976,
Guaria Corporation executed a real estate mortgage over several real properties in favor of DBP as
security for the repayment of the loan. On May 17, 1977, Guaria Corporation executed a chattelmortgage
over the personal properties existing at the resort complex and those yet to be acquired out of the
proceeds of the loan, also to secure the performance of the obligation. Prior to the release of the loan, DBP
required Guaria Corporation to put up a cash equity of P1,470,951.00 for the construction of the
buildings and other improvements on the resort complex.

The loan was released in several installments, and Guaria Corporation used the proceeds to
defray the cost of additional improvements in the resort complex. In all, the amount released totaled
P3,003,617.49, from which DBP withheld P148,102.98 as interest.

Guaria Corporation demanded the release of the balance of the loan, but DBP refused. Instead,
DBP directly paid some suppliers of Guaria Corporation over the latters objection. DBP found upon
inspection of the resort project, its developments and improvements that Guaria Corporation had not
completed the construction works. In a letter dated February 27, 1978, and a telegram dated June 9, 1978,
DBP thus demanded that Guaria Corporation expedite the completion of the project, and warned that it
would initiate foreclosure proceedings should Guaria Corporation not do so.10

Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated
extrajudicial foreclosure proceedings

ISSUE:

Whether or not Guarina was in delay in performing its obligation making DBPs action to
foreclose the mortgage proper.

HELD:

NO. The Court held that the foreclosure of a mortgage prior to the mortgagors default on the
principal obligation is premature, and should be undone for being void and ineffectual. The mortgagee
who has been meanwhile given possession of the mortgaged property by virtue of a writ of possession
issued to it as the purchaser at theforeclosure sale may be required to restore the possession of the
property to the mortgagor and to pay reasonable rent for the use of the property during the intervening
period.

The agreement between DBP and Guaria Corporation was a loan. Under the law, a loan requires
the delivery of money or any other consumable object by one party to another who acquires ownership
thereof, on the condition that the same amount or quality shall be paid. Loan is a reciprocal obligation, as
it arises from the same cause where one party is the creditor, and the other the debtor. The obligation of
one party in a reciprocal obligation is dependent upon the obligation of the other, and the performance
should ideally be simultaneous. This means that in a loan, the creditor should release the full loan amount
and the debtor repays it when it becomes due and demandable.

The loan agreement between the parties is a reciprocal obligation. Appellant in the instant case
bound itself to grant appellee the loan amount of P3,387,000.00 condition on appellees payment of the
amount when it falls due. The appellant did not release the total amount of the approved
loan. Appellant therefore could not have made a demand for payment of the loan since it had yet to fulfil
its own obligation. Moreover, the fact that appellee was not yet in default rendered
the foreclosure proceedings premature and improper.

By its failure to release the proceeds of the loan in their entirety, DBP had no right yet to exact on
Guaria Corporation the latters compliance with its own obligation under the loan. Indeed, if a party in a
reciprocal contract like a loan does not perform its obligation, the other party cannot be obliged to
perform what is expected of it while the others obligation remains unfulfilled. In other words, the latter
party does not incur delay.

G.R. No. L-4150 February 10, 1910

Facts: The Plaintiff Felix delos Santos filed this suit against Agustina Jarra. Jarra was
the administratix of the estate of Jimenea. Plaintiff alleged that he owned 10 1st class
carabaos which he lent to his father-in-law Jimenea to be used in the animal-power mill
without compensation. This was done on the condition of their return after the work at
the latters mill is terminated. When delos Santos demanded the return of the animals
Jimenea refused, hence this suit.

Issue: W/N the contracts is one of a commodatum

Ruling: YES. The carabaos were given on commodatum as these were delivered to be
used by defendant. Upon failure of defendant to return the cattle upon demand, he is
under the obligation to indemnify the plaintiff by paying him their value. Since the 6
carabaos were not the property of the deceased or of any of his descendants, it is the
duty of the administratrix of the estate to either return them or indemnify the owner
thereof of their value.
SAURA IMPORT and EXPERT CO., INC., vs DBP
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J.

FACTS:

In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial loan of P500,000 to be
used for the construction of a factory building, to pay the balance of the jute mill machinery and equipment and as
additional working capital. In Resolution No.145, the loan application was approved to be secured first by mortgage
on the factory buildings, the land site, and machinery and equipment to be installed.
The mortgage was registered and documents for the promissory note were executed. But then, later on, was
cancelled to make way for the registration of a mortgage contract over the same property in favor of Prudential Bank
and Trust Co., the latter having issued Saura letter of credit for the release of the jute machinery. As security, Saura
execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation, Prudential sued Saura.
After almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the latter to comply with its
obligations to release the loan applied for and approved, thereby preventing the plaintiff from completing or paying
contractual commitments it had entered into, in connection with its jute mill project.
The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties and that the RFC
was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the parties. YES. There was indeed a perfected consensual
contract.

HELD:
Article 1934 provides: An accepted promise to deliver something by way of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself shall not be perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the case. The application of Saura, Inc. for a loan of P500,000.00 was approved
by resolution of the defendant, and the corresponding mortgage was executed and registered. The defendant failed to fulfill its
obligation and the plaintiff is therefore entitled to recover damages.
When an application for a loan of money was approved by resolution of the respondent corporation and the responding mortgage
was executed and registered, there arises a perfected consensual contract.
However, it should be noted that RFC imposed two conditions (availability of raw materials and increased production) when it
restored the loan to the original amount of P500,000.00.
Saura, Inc. obviously was in no position to comply with RFCs conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action thus taken by both parties was in the
nature of mutual desistance which is a mode of extinguishing obligations. It is a concept that derives from the principle
that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.
WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.
Naguiat vs CA and Queao

GR No. 118375, 03 October 2003

FACTS

Queao applied with Naguiat a loan for P200,000, which the latter granted. Naguiat indorsed to Queao
Associated bank Check No. 090990 for the amount of P95,000 and issued also her own Filmanbank
Check to the order of Queao for the amount of P95,000. The proceeds of these checks were to constitute
the loan granted by Naguiat to Queao. To secure the loan, Queao executed a Deed of Real Estate
Mortgage in favor of Naguiat, and surrendered the owners duplicates of titles of the mortgaged
properties. The deed was notarized and Queao issued to Naguiat a promissory note for the amount of
P200,000. Queao also issued a post-dated check amounting to P200,000 payable to the order of
Naguait. The check was dishonoured for insufficiency of funds. Demand was sent to Queao. Shortly,
Queao, and one Ruby Reubenfeldt met with Naguiat. Queao told Naguiat that she did not receive the
loan proceeds, adding that the checks were retained by Reubenfeldt, who purportedly was Naguiats
agent.

Naguiat applied for extrajudicial foreclosure of the mortgage. RTC declared the Deed as null and void and
ordered Naguiat to return to Queao the owners duplicates of titles of the mortgaged lots.

ISSUE

Whether or not the issuance of check resulted in the perfection of the loan contract.

HELD

The Court held in the negative. No evidence was submitted by Naguiat that the checks she issued or
endorsed were actually encashed or deposited. The mere issuance of the checks did not result in the
perfection of the contract of loan. The Civil Code provides that the delivery of bills of exchange and
mercantile documents such as checks shall produce the effect of payment only when they have been
cashed. It is only after the checks have been produced the effect of payment that the contract of loan may
have been perfected.

Article 1934 of the Civil Code provides: An accepted promise to deliver something by way of commodatum
or simple loan is binding upon the parties, but the commodatum or simple loan itsel shall not be perfected
until the delivery of the object of the contract. A loan contract is a real contract, not consensual, and as
such, is perfected only upon the delivery of the objects of the contract.
Carolyn M. Garcia
-vs-
Rica Marie S. Thio
GR No. 154878, 16 March 2007

FACTS
Respondent Thio received from petitioner Garcia two crossed checks which amount
to US$100,000 and US$500,000, respectively, payable to the order of Marilou Santiago.
According to petitioner, respondent failed to pay the principal amounts of the loans when
they fell due and so she filed a complaint for sum of money and damages with the RTC.
Respondent denied that she contracted the two loans and countered that it was Marilou
Satiago to whom petitioner lent the money. She claimed she was merely asked y petitioner
to give the checks to Santiago. She issued the checks for P76,000 and P20,000 not as
payment of interest but to accommodate petitioners request that respondent use her own
checks instead of Santiagos.

RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract
of loan between the parties.

ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?

HELD
(1) The Court held in the affirmative. A loan is a real contract, not consensual, and as
such I perfected only upon the delivery of the object of the contract. Upon delivery of the
contract of loan (in this case the money received by the debtor when the checks were
encashed) the debtor acquires ownership of such money or loan proceeds and is bound to
pay the creditor an equal amount. It is undisputed that the checks were delivered to
respondent.
(2) However, the checks were crossed and payable not to the order of the respondent
but to the order of a certain Marilou Santiago. Delivery is the act by which the res or
substance is thereof placed within the actual or constructive possession or control of
another. Although respondent did not physically receive the proceeds of the checks, these
instruments were placed in her control and possession under an arrangement whereby she
actually re-lent the amount to Santiago
Petition granted; judgment and resolution reversed and set aside.
G.R. No. 174269, May 8 2009 [Credit Transaction]
FACTS:
After the Amsterdam incident that happened involving the delay of American Express Card
to approve his credit card purchases worth US$13,826.00 at the Coster store, Pantaleon
commenced a complaint for moral and exemplary damages before the RTC against American
Express. He said that he and his family experienced inconvenience and humiliation due to
the delays in credit authorization. RTC rendered a decision in favor of Pantaleon. CA reversed
the award of damages in favor of Pantaleon, holding that AmEx had not breached its
obligations to Pantaleon, as the purchase at Coster deviated from Pantaleon's established
charge purchase pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.

RULING:
1. Yes. The popular notion that credit card purchases are approved within seconds, there
really is no strict, legally determinative point of demarcation on how long must it take for a
credit card company to approve or disapprove a customers purchase, much less one
specifically contracted upon by the parties. One hour appears to be patently unreasonable
length of time to approve or disapprove a credit card purchase.

The culpable failure of AmEx herein is not the failure to timely approve petitioners purchase,
but the more elemental failure to timely act on the same, whether favorably or unfavorably.
Even assuming that AmExs credit authorizers did not have sufficient basis on hand to make
a judgment, we see no reason why it could not have promptly informed Pantaleon the reason
for the delay, and duly advised him that resolving the same could take some time.
2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx
incurred delay, but because the delay, for which culpability lies under Article 1170, led to the
particular injuries under Article 2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending circumstances to the purchase at Coster
that there was a deadline for the completion of that purchase by petitioner before any delay
would redound to the injury of his several traveling companions gave rise to the moral
shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained
by Pantaleon, as concluded by the RTC.

Gironella v. PNB
G.R. No. 194515. Sept. 16, 2015.
Perez J.

FACTS:
On November 11, 1991 and January 16, 1992, the Spouses Oscar and Gina Gironella obtained two co-
terminus loans amounting to 7,500,000 php and 2,000,000 php from Philippine National Bank (PNB) for the
construction of the Dagupan Village Hotel and Sports Complex. Both loans were payable on installment and
secured by the same real estate mortgage over a parcel of land covered by TCT No. 56059 in favor of PNB.
In May 1992, the Spouses Gironella applied for another loan amounting to 5,800,000 php for the construction
of a disco-restaurant and bar and the purchase of a generator set.
From the period of February 1993 to October 2, 1995, the Spouses Gironella paid 4,219,000 php in total for
their first two loans.
The Spouses Gironella defaulted in paying the prior two loans. The Spouses alleged that: (1) they were made
to believe by PNB that their third loan would be approved, (2) they were directed to proceed with their
expansion plans and (3) there would be a loan restructuring. Thus, they the income generated by the hotel
while the third was pending.
In January and April 1998, the Spouses Gironella paid a total of 2,650,000 php allegedly to effect the
restructuring of their loans. Despite restructuring negotiations, PNB filed a petition to foreclose the mortgaged
property on May 29, 1996 and April 17, 1998 and a Notice of Extra-judicial Foreclosure Sale. The final
foreclosure was subsequently stalled but was refiled on July 25, 2000 after failure to agree on the
restructuring.
Spouses Gironella filed a complaint before the RTC with prayer for issuance of a Temporary Restraining Order
(TRO) and preliminary injunction to enjoin the enforcement of the original credit agreements and the
foreclosure of the mortgaged property. The RTC issued the TRO and Writ of Preliminary injunction and
subsequently, grant the complaint by ruling that there was a binding credit restructuring agreement. On Motion
for Partial Reconsideration, RTC clarified that actual and compensatory damages to reckon from the date of the
filing of the amended complaint and declared permanent the writ of preliminary injunction.
PNB filed a petition an appeal to the CA arguing that the letters sent on January 2000 and February 7, 2000
were not perfected since there was only a qualified acceptance equivalent to a counter-offer. CA favored PNB.
The bare allegations of abuse of right by PNB on giving the Spouses Gironella false hope was insufficient to
grant them damages.
Spouses Gironella filed a petition for review under Rule 45 of the Rules of Court.

ISSUE: W/N CA is correct that there is no acceptance to perfect the credit restructuring agreement.
HELD: YES. No restructured loan agreement at all that was perfected. Petition is Denied.
There are 3 distinct stages of a contract: (1) preparation or negotiation (2) perfection and (3) consummation.
The credit restructuring loan was in the negotiation stage. The application for additional loan separate from the
first two credit loans was also in the negotiation stage.
The approval of the additional loan is not contingent on the representation of the PNB officers as PNB must
comply with the General Banking Law to assess based on specific legal banking requirements. Thus, it cannot
be approved without qualification.
A contract is perfected by mere consent. In turn, consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and
the acceptance seasonable and absolute. If qualified, the acceptance would merely constitute a counter-offer
as what occurred in this case.
To reach that moment of perfection, the parties must agree on the same thing in the same sense, so that their
minds meet as to all the terms. They must have a distinct intention common to both and without doubt or
difference; until all understand alike, there can be no assent, and therefore no contract. The minds of parties
must meet at every point; nothing can be left open for further arrangement. So long as there is any uncertainty
or indefiniteness, or future negotiations or considerations to be had between the parties, there is not a
completed contract, and in fact, there is no contract at all.
The Spouses Gironella's payments under its original loan account cannot be considered as partial execution of
the proposed restructuring loan agreement. Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the moment of agreement of the parties.
Once there is concurrence of the offer and acceptance of the object and cause, the stage of negotiation is
finished. Since there was a counter-offer, the parties were not past the stage of negotiation.

Credit Transactions Case Digest: BPI Investment Corp V. CA (2002)

Facts:

Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the construction of
a house on his lot in New Alabang Village, Muntinlupa.
He mortgaged the house and lot to AIDC as security for the loan.
1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio Litonjua for
P850K who paid P350K in cash and assumed the P500K indebtness of ROA with AIDC.
AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of
20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years through
 equal monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from the date
the amortization becomes due and payable.
March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with the
provision that the monthly amortization will commence on May 1, 1981
August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan to
P457,204.90.
September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was left of
their loan after full payment of Roas loan
June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the ground that they
failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984 amounting
to P475,585.31
August 13, 1984: Notice of sheriff's sale was published
February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they are
not in arrears and instead they made an overpayment as of June 30, 1984 since the P500K loan was only
released September 13, 1982 which marked the start of the amortization and since only P464,351.77 was
released applying legal compensation the balance of P35,648.23 should be applied to the monthly
amortizations
RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and Litonjua
was only in the principal sum of P464,351.77 and awarding moral damages, exemplary damages and
attorneys fees for the publication
CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the contract which
is on September 13, 1982
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the loan?

HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of moral and
exemplary damages in favor of private respondents is DELETED, but the award to them of attorneys fees in
the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000
as nominal damages. Costs against petitioner.
obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract
contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other. It is a basic principle in reciprocal obligations that neither party incurs in
delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent
upon him. Consequently, petitioner could only demand for the payment of the monthly amortization after
September 13, 1982 for it was only then when it complied with its obligation under the loan contract.
BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without checking
and correspondingly adjusting its records on the amount actually released and the date when it was
released. Such negligence resulted in damage for which an award of nominal damages should be given
SSS where we awarded attorneys fees because private respondents were compelled to litigate, we
sustain the award of P50,000 in favor of private respondents as attorneys fees
PENTACAPITAL INVESTMENT CORPORATION,
Petitioner,
- versus -
MAKILITO B. MAHINAY,
G.R. No. 171736

Facts:
Petitioner filed a complaint for a sum of money against respondent
Makilito Mahinay based on two separate loans obtained by the latter,
amounting to P1,520,000.00 and P416,800.00, or a total amount of
P1,936,800.00. These loans were evidenced by two promissory notes.
Answer with Compulsory Counterclaim: Petitioner had no cause of action
because the PNs were subject to a condition that did not occur.8 While
admitting that he indeed signed the promissory notes, he insisted that he
never took out a loan and that the notes were not intended to be
evidences of indebtedness.9 By way of counterclaim, respondent prayed
for the payment of moral and exemplary damages plus attorneys fees.10
Respondent explained that he was the counsel of Ciudad Real
Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation
(Pentacapital Realty) offered to buy parcels of land known as the Molino
Properties, owned by CRDI. The Molino Properties were sold. As the Molino
Properties were the subject of a pending case, Pentacapital Realty paid
only the down payment amounting to P12,000,000.00. CRDI allegedly
instructed Pentacapital Realty to pay the formers creditors, including
respondent who thus received a check worth P1,715,156.90.
Respondent, Pentacapital Realty and CRDI allegedly agreed that
respondent had a charging lien equivalent to 20% of the total
consideration of the sale in the amount of P10,277,040.00. Pending the
submission of the Entry of Judgment and as a sign of good faith,
respondent purportedly returned the P1,715,156.90 check to Pentacapital
Realty. However, the Molino Properties continued to be haunted by the
seemingly interminable court actions initiated by different parties which
thus prevented respondent from collecting his commission.
On motion of respondent, the Regional Trial Court (RTC) allowed him to file
a Third Party Complaint14 against CRDI, subject to the payment of docket
fees.15
Admittedly, respondent earlier instituted an action for Specific
Performance against Pentacapital Realty before the RTC of Cebu City,
Branch 57, praying for the payment of his commission on the sale of the
Molino Properties.16In an Amended Complaint,17 respondent referred to
the action he instituted as one of Preliminary Mandatory Injunction
instead of Specific Performance. Acting on Pentacapital Realtys Motion to
Dismiss, the RTC dismissed the case for lack of cause of action.18 The
dismissal became final and executor

Issue:
Whether or not the respondent is bound by the promissory notes

Held
No. A contract of loan is subject to the rules governing the requisites and
validity of contracts in general. It is elementary in this jurisdiction that
what determines the validity of a contract, in general, is the presence of
the following elements: (1) consent of the contracting parties; (2) object
certain which is the subject matter of the contract; and (3) cause of the
obligation which is established. Under Article 1354 of the Civil Code, it is
presumed that consideration exists and is lawful unless the debtor proves
the contrary.[38] Moreover, under Section 3, Rule 131 of the Rules of Court,
the following are disputable presumptions: (1) private transactions have
been fair and regular; (2) the ordinary course of business has been
followed; and (3) there was sufficient consideration for a contract. [39] A
presumption may operate against an adversary who has not introduced
proof to rebut it. The effect of a legal presumption upon a burden of proof
is to create the necessity of presenting evidence to meet the legal
presumption or the prima facie case created thereby, and which, if no
proof to the contrary is presented and offered, will prevail. As it now
appears, the promissory notes clearly stated that respondent promised to
pay petitioner P1,520,000.00 and P416,800.00, plus interests and penalty
charges, a year after their execution. Nowhere in the notes was it stated
that they were subject to a condition. As correctly observed by petitioner,
respondent is not only a lawyer but a law professor as well. He is,
therefore, legally presumed not only to exercise vigilance over his
concerns but, more importantly, to know the legal and binding effects of
promissory notes and the intricacies involving the execution of negotiable
instruments including the need to execute an agreement to document
extraneous collateral
conditions and/or agreements, if truly there were such. Respondents
liability is not negated by the fact that he has uncollected commissions
from the sale of the Molino properties. As the records of the case show, at
the time of the execution of the promissory notes, the Molino properties
were subject of various court actions commenced by different parties.
Thus, the sale of the properties and, consequently, the payment of
respondents commissions were put on hold. The non-payment of his
commissions could very well be the reason why he obtained a loan from
petitioner.

G.R. No. 90270 July 24, 1992

ARMANDO V. SIERRA, petitioner,

vs.
HON. COURT OF APPEALS, EPIFANIA EBARLE, SOL AND ELE EBARLE, respondents.

Facts:
On November 2, 1984, the petitioner filed a complaint against the private respondents in the Regional Trial
Court of Dumaguete City. He sought recovery of a sum of money be allegedly lent them under the following
promissory note. In their separate answers, the private respondents denied under oath "the genuineness, due
execution, legality and validity" of the promissory note. They alleged that the note was executed "under duress,
fear and undue influence." They also counterclaimed for damages. On July 21, 1988, the trial court rendered a
decision holding that the promissory note for P85,000.00 was invalid and that the private respondents were
liable to the petitioner only for the loan of P20,000.00. 1 On appeal, this decision was affirmed by the
respondents court.

FLORENTINA A. LOZANO, petitioner, vs. THE HONORABLE ANTONIO M. MARTINEZ, in his

capacity as Presiding Judge, Regional Trial Court, National Capital Judicial Region, Branch XX,
Manila, and the HONORABLE JOSE B. FLAMINIANO, in his capacity as City Fiscal of Manila,
respondents.

YAP, J:
Petitioners, charged with Batas Pambansa Bilang 22 (BP 22 for short), popularly known as
the Bouncing Check Law, assail the law's constitutionality.

BP 22 punishes a person "who makes or draws and issues any check on account or for value,
knowing at the time of issue that he does not have sufficient funds in or credit with the
drawee bank for the payment of said check in full upon presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit or would
have been dishonored for the same reason had not the drawer, without any valid reason,
ordered the bank to stop payment." The penalty prescribed for the offense is imprisonment
of not less than 30 days nor more than one year or a fine or not less than the amount of the
check nor more than double said amount, but in no case to exceed P200,000.00, or both
such fine and imprisonment at the discretion of the court.

The statute likewise imposes the same penalty on "any person who, having sufficient funds
in or credit with the drawee bank when he makes or draws and issues a check, shall fail to
keep sufficient funds or to maintain a credit to cover the full amount of the check if
presented within a period of ninety (90) days from the date appearing thereon, for which
reason it is dishonored by the drawee bank.

An essential element of the offense is "knowledge" on the part of the maker or drawer of the
check of the insufficiency of his funds in or credit with the bank to cover the check upon its
presentment. Since this involves a state of mind difficult to establish, the statute itself
creates a prima facie presumption of such knowledge where payment of the check "is
refused by the drawee because of insufficient funds in or credit with such bank when
presented within ninety (90) days from the date of the check. To mitigate the harshness of
the law in its application, the statute provides that such presumption shall not arise if within
five (5) banking days from receipt of the notice of dishonor, the maker or drawer makes
arrangements for payment of the check by the bank or pays the holder the amount of the
check.

Another provision of the statute, also in the nature of a rule of evidence, provides that the
introduction in evidence of the unpaid and dishonored check with the drawee bank's refusal
to pay "stamped or written thereon or attached thereto, giving the reason therefor, "shall
constitute prima facie proof of "the making or issuance of said check, and the due
presentment to the drawee for payment and the dishonor thereof ... for the reason written,
stamped or attached by the drawee on such dishonored check."

The presumptions being merely prima facie, it is open to the accused of course to present
proof to the contrary to overcome the said presumptions.

ISSUE: Whether or not (W/N) BP 22 violates the constitutional provision forbidding

imprisonment for debt.

HELD: No.
The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment. It is not the non-
payment of an obligation which the law punishes. The law is not intended or designed to
coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting them in circulation. Because of its
deleterious effects on the public interest, the practice is proscribed by the law. The law
punishes the act not as an offense against property, but an offense against public order.

The effects of the issuance of a worthless check transcends the private interests of the
parties directly involved in the transaction and touches the interests of the community at
large. The mischief it creates is not only a wrong to the payee or holder, but also an injury to
the public. The harmful practice of putting valueless commercial papers in circulation,
multiplied a thousand fold, can very wen pollute the channels of trade and commerce, injure
the banking system and eventually hurt the welfare of society and the public interest.
The enactment of BP 22 is a declaration by the legislature that, as a matter of public policy,
the making and issuance of a worthless check is deemed public nuisance to be abated by
the imposition of penal sanctions.

ISSUE: W/N BP 22 impairs the freedom to contract.

HELD: No. The freedom of contract which is constitutionally protected is freedom to enter
into "lawful" contracts. Contracts which contravene public policy are not lawful. Besides, we
must bear in mind that checks can not be categorized as mere contracts. It is a commercial
instrument which, in this modem day and age, has become a convenient substitute for
money; it forms part of the banking system and therefore not entirely free from the
regulatory power of the state.

ISSUE: W/N it violates the equal protection clause.

HELD: No. Petitioners contend that the payee is just as responsible for the crime as the
drawer of the check, since without the indispensable participation of the payee by his
acceptance of the check there would be no crime. This argument is tantamount to saying
that, to give equal protection, the law should punish both the swindler and the swindled.
Moreover, the clause does not preclude classification of individuals, who may be accorded
different treatment under the law as long as the classification is no unreasonable or
arbitrary.

G.R. No. 122539 March 4, 1999

JESUS V. TIOMICO, petitioner,
vs.
THE HON. COURT OF APPEALS (FORMER FIFTH DIVISION) and PEOPLE OF THE
PHILIPPINES, respondent.

Facts:
Petitioner Jesus V. Tiomico, (Tiomico) opened a Letter of Credit with the Bank of the Philippine Islands (BPI) for
$5,600 to be used for the importation of machineries. On October 29, 1982, the said machineries were received
by the accused, as evidenced by the covering trust receipt. Upon maturity of the trust receipt, on December 28,
1982, he made a partial payment of US$855.94, thereby leaving an unpaid obligation of US$4,770.46. As of
December 21, 1989, Tiomico owed BPI US$4,770.46, or P109,386.65, computed at P22.93 per US dollar, the
rate of exchange at the time. Failing to pay the said amount or to deliver subject machineries and equipments,
despite several demands, the International Operations Department of BPI referred the matter to the Legal
Department of the bank. But the letter of demand sent to him notwithstanding, Tiomico failed to satisfy his
monetary obligation sued upon. Consequently, a suit was filed against him in violation of pd 115. The trial court
had promulgated its decision finding petitioner guilty of a violation of PD 115.
On appeal, the Court of Appeals came out with a judgment of affirmance.

Issue:
WHETHER OR NOT PD 115 OR TRUST RECEIPTS LAW IS UNCONSTITUTIONAL

Held:
the Court has repeatedly upheld the validity of the Trust Receipts Law and consistently declared that the said
law does not violate the constitutional proscription againts imprisonment for non-payment of debts. In fine, PD
115 is a valid exercise of police power and is not repugnant to the constitutional provision of non-imprisonment
for non-payment of debt.

In a similar vein, the case of People vs. Nitafan (supra) held:

The Trust Receipts Law punishes the dishonesty and abuse of confidence in the handling of money or goods to
the prejudice of another regardless of whether the latter is the owner or not. The law does not seek to enforce
payment of a loan. Thus, there can be no violation of the right against imprisonment for non-payment of a debt.

Commodatum
public v. Bagtas

Facts: Bagtas borrowed three bulls from the Bureau of Animal Industry for one year for breeding purposes subject to
payment of breeding fee of 10% of book value of the bull. Upon expiration, Bagtas asked for renewal. The renewal
was granted only to one bull. Bagtas offered to buy the bulls at its book value less depreciation but the Bureau
refused. The Bureau said that Bagtas should either return or buy it at book value. Bagtas proved that he already
returned two of the bulls, and the other bull died during a Huk raid, hence, obligation already extinguished. He
claims that the contract is a commodatum hence, loss through fortuitous event should be borne by the owner.

Issue: WON Bagtas is liable for the death of the bull.

Held: Yes. Commodatum is essentially gratuitous. However, in this case, there is a 10% charge. If this is considered
compensation, then the case at bar is a lease. Lessee is liable as possessor in bad faith because the period already
lapsed.Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened when he held the
bull and the period stipulated already expired and he is liable because the thing loaned was delivered with appraisal
of value and there was no contrary stipulation regarding his liability in case there is a fortuitous event.

Credit - 6Producers Bank of the Philippines vs CA (2003)

Doctrine:

Facts:


Vives (will be the creditor in this case) was asked by his friend Sanchez to help thelatters friend, Doronilla (will be
the debtor in this case) in incorporating Doronillasbusiness Strela. This help basically involved Vives depositing
a certain amount of money in Strelas bank account for purposes of incorporation (rationale: Doronilla had toshow
that he had sufficient funds for incorporation). This amount shall later be returnedto Vives.

Relying on the assurances and representations of Sanchez and Doronilla, Vives issued acheck of P200,00 in favor of
Strela and deposited the same into Strelas newly-openedbank account (the passbook was given to the wife of Vives
and the passbook had aninstruction that no withdrawals/deposits will be allowed unless the passbook ispresented).

Later on, Vives learned that Strela was no longer holding office in the address previouslygiven to him. He later
found out that the funds had already been withdrawn leaving onlya balance of P90,000. The Vives spouses tried to
withdraw the amount, but it wasunable to since the balance had to answer for certain postdated checks issued
byDoronilla.

Doronilla made various tenders of check in favor of Vives in order to pay his debt. All of which were dishonored.

Hence, Vives filed an action for recovery of sum against Doronilla, Sanchez, Dumagpiand Producers Bank.

TC & CA: ruled in favor of Vives.

Issue/s:

(1)WON the transaction is a commodatum or a mutuum. COMMODATUM.(2) WON the fact that there is an additional
P 12,000 (allegedly representing interest) inthe amount to be returned to Vives converts the transaction from
commodatum tomutuum. NO.(3)WON Producers Bank is solidarily liable to Vives, considering that it was not privy
tothe transaction between Vives and Doronilla. YES.

Held/Ratio:

(1)The transaction is a commodatum.

CC 1933 (the provision distinguishing between the two kinds of loans) seem to implythat if the subject of the
contract is a consummable thing, such as money, the contractwould be a mutuum. However, there are instances
when a commodatum may have forits object a consummable thing. Such can be found in CC 1936 which states
thatconsummable goods may be the subject of commodatum if the purpose of the contractis not the consumption
of the object, as when it is merely for exhibition. In this case,the intention of the parties was merely for exhibition.
Vives agreed to deposit his moneyin Strelas account specifically for purpose of making it appear that Streal had
sufficientcapitalization for incorporation, with the promise that the amount should be returned
 Mina v. Pascual, 25 Phil 540

Francisco is the owner of land and he allowed his brother, Andres, to erect a warehouse in that
lot. Both Francisco and Andres died and their children became their respective heirs: Mina for
Francisco and Pascual for Andres. Pascual sold his share of the warehouse and lot. Mina
opposed because the lot is hers because her predecessor (Francisco) never parted with its
ownership when he let Andres construct a warehouse, hence, it was a contract of
commodatum.

Issue: WoN there exist a contract of commodatum

Held:
although both litigating parties may have agreed in their idea of the commodatum, on account of its not being, as
indeed it is not, a question of fact but of law Contracts are not to be interpreted in conformity with the name that
the parties thereto agree to give them, but must be construed, duly considering their constitutive elements, as they
are defined and denominated by law. By the contract of loan, one of the parties delivers to the other, either
anything not perishable, in order that the latter may use it during the certain period and return it to the former, in
which case it is called commodatum. It is, therefore, an essential feature of the commodatum that the use of the
thing belonging to another shall BE for a certain period. Francisco Fontanilla did not fix any definite period or time
during which Andres Fontanilla could have the use of the lot whereon the latter was to erect a stone warehouse of
considerable value, and so it is that for the past thirty years of the lot has been used by both Andres and his
successors in interest.
Quintos vs Beck
G.R. No. L-46240 November 3, 1939 MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants, vs. BECK,
defendant-appellee.
FACTS
: Defendant Beck was a tenant of the plaintiff and as such, occupied the latters house. In 1936, the plaintiff
gratuitously granted to Beck the use of the furniture, subject to the condition that Beck would return them to the
plaintiff upon the latters demand. The plaintiff sold the property to the Lopezes and on September 1936, they
notified Beck of the conveyance, giving him 60 days to vacate. The plaintiff also required Beck to return all the
furniture in the house where they were found. Beck wrote to the plaintiff stating that she may call for the furniture
in the ground floor of the house. Beck later informed the plaintiff that he could not give up 3 gas heaters and 4
electric lamps because he would use them until the 15th of the month when the lease is due to expire. Plaintiff
refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Upon
the expiration of the lease and before vacating the house, Beck deposited with the Sheriff all the furniture belonging
to the plaintiff. Plaintiff brought an action to compel Beck to return the furniture. CFI ordered that Beck return the
heaters and lamps, that plaintiff may call for the other furniture from the sheriff at her own expense, and that the
fees which the Sheriff may charge for the deposit of the furniture be paid pro rata by both parties. Plaintiffs
appealed the ruling. To dispose of the case, it is only necessary to decide whether the defendant complied with his
obligation to return the furniture upon the plaintiff's demand; whether the latter is bound to bear the deposit fees
thereof, and whether she is entitled to the costs of litigation.
ISSUE
: W/N a contract of commodatum existed between the parties
YES
HELD
: The contract entered into between the parties is one of commadatum, because under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this contract the
defendant bound himself to return the furniture to the plaintiff, upon the latters demand.
The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that
he should return all of them to the plaintiff at the latter's residence or house.
The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff ,
retaining for his benefit the heaters and lamps. The provisions of article 1169 of the Civil Code cited by counsel for
the parties are not squarely applicable. The trial court, therefore, erred when it came to the legal conclusion that
the plaintiff failed to comply with her obligation to get the furniture when they were offered to her. As the defendant
had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand, the Court could not
legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. The
latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the
offer to return the furniture, because the defendant wanted to retain the three gas heaters and the four electric
lamps. As to the value of the furniture, we do not believe that the plaintiff is entitled to the payment thereof by the
defendant in case of his inability to return some of the furniture because under paragraph 6 of the stipulation of
facts, the defendant has neither agreed to nor admitted the correctness of the said value. Should the defendant fail
to deliver some of the furniture, the value thereof should be latter determined by the trial Court through evidence
which the parties may desire to present. The costs in both instances should be borne by the defendant. The
defendant was the one who breached the contract of commodatum. In these circumstances, it is just that he pay
the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed. The appealed
judgment is modified and the defendant is ordered to return and deliver to the plaintiff, in the residence to return
and deliver to the plaintiff, in the residence or house of the latter, all the furniture. The expenses which may be
occasioned by the delivery to and deposit of the furniture with the Sheriff shall be for the account of the defendant
Pajuyo v. CA
GR No. 146364 June 3, 2004

Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should return the
same upon demand and with the condition that Guevara should be responsible of the
maintenance of the property. Upon demand Guevara refused to return the property to Pajuyo.
The petitioner then filed an ejectment case against Guevara with the MTC who ruled in favor of
the petitioner. On appeal with the CA, the appellate court reversed the judgment of the lower
court on the ground that both parties are illegal settlers on the property thus have no legal right
so that the Court should leave the present situation with respect to possession of the property as
it is, and ruling further that the contractual relationship of Pajuyo and Guevara was that of a
commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a commodatum?

Held: No. The Court of Appeals theory that the Kasunduan is one of commodatum is devoid of
merit. In a contract of commodatum, one of the parties delivers to another something not
consumable so that the latter may use the same for a certain time and return it. An essential
feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use
of the thing belonging to another is for a certain period. Thus, the bailor cannot demand the
return of the thing loaned until after expiration of the period stipulated, or after accomplishment
of the use for which the commodatum is constituted. If the bailor should have urgent need of the
thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by
the bailor, he can demand the return of the thing at will, in which case the contractual relation is
called a precarium. Under the Civil Code, precarium is a kind of commodatum. The Kasunduan
reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous.
While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the
property in good condition. The imposition of this obligation makes the Kasunduan a contract
different from a commodatum. The effects of the Kasunduan are also different from that of a
commodatum. Case law on ejectment has treated relationship based on tolerance as one that is
akin to a landlord-tenant relationship where the withdrawal of permission would result in the
termination of the lease. The tenants withholding of the property would then be unlawful.
G.R. No. L-46145 November 26, 1986

REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,

vs.
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY, represented by RICARDO BALOY, ET
AL., respondents.

Facts:
Applicants' claim is anchored on their possessory information title (Exhibit F which had been translated in Exhibit F-
1) coupled with their continuous, adverse and public possession over the land in question. An examination of the
possessory information title shows that the description and the area of the land stated therein substantially
coincides with the land applied for and that said possessory information title had been regularly issued having been
acquired by applicants' predecessor, Domingo Baloy, under the provisions of the Spanish Mortgage Law. Applicants
presented their tax declaration on said lands on April 8, 1965. The Director of Lands opposed the registration
alleging that this land had become public land thru the operation of Act 627 of the Philippine Commission. On
November 26, 1902 pursuant to the executive order of the President of the U.S., the area was declared within the
U.S. Naval Reservation. Thus, the US Navy possessed the area for 57 years from November 26, 1902 to December
17, 1959. The US Navy had abandoned the area in 1957. Thereafter, Domingo Baloy came in and asserted title once
again, only to be troubled by first Crispiano blanco who however in due time, quitclaimed in favor of applicants, and
then by private oppositors now, apparently originally tenants of Blanco. The CA reversed the ruling of the CFI and
approved the application because there was no formal order or decision of the said Court of Land Registration
declaring the land public and because of that failure, it can with plausibility be said after all, there was no judicial
declaration to that effect, it is true that the US Navy did occupy it apparently for some time, as a recreation area, as
this Court understands from the communication of the DFA to the US Embassy exhibited in the record.

Issue:
Whether or not the nature of possession is commodatum

Held:

Yes. The finding of respondent court that during the interim of 57 years from November 26, 1902 to December 17,
1959 (when the U.S. Navy possessed the area) the possessory rights of Baloy or heirs were merely suspended and
not lost by prescription, is supported by Exhibit "U," a communication or letter No. 1108-63, dated June 24, 1963,
which contains an official statement of the position of the Republic of the Philippines with regard to the status of the
land in question. Said letter recognizes the fact that Domingo Baloy and/or his heirs have been in continuous
possession of said land since 1894 as attested by an "Informacion Possessoria" Title, which was granted by the
Spanish Government. Hence, the disputed property is private land and this possession was interrupted only by the
occupation of the land by the U.S. Navy in 1945 for recreational purposes. The U.S. Navy eventually abandoned the
premises. The heirs of the late Domingo P. Baloy, are now in actual possession, and this has been so since the
abandonment by the U.S. Navy. A new recreation area is now being used by the U.S. Navy personnel and this place
is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of owner. It partakes of the character of a
commodatum. It cannot therefore militate against the title of Domingo Baloy and his successors-in-interest. One's
ownership of a thing may be lost by prescription by reason of another's possession if such possession be under
claim of ownership, not where the possession is only intended to be transient, as in the case of the U.S. Navy's
occupation of the land concerned, in which case the owner is not divested of his title, although it cannot be
exercised in the meantime.

Mutuum
Republic vs Grijaldo
Facts:
Grijaldo obtained five loans from the Bank of Taiwanin the total sum of P1,281.97 with interest at therats of 6% per
annum compounded quarterly. Thesewere evidenced by five promissory notes. These loans were crop loans and
was considered tobe due one year after they were incurred. A a security for the payment of the loans, a
chattelmortgage was executed on the standing crops of hisland. The assets in the Bank of Taiwan were vested in
theUS Govt which were subsequently transferred to theRepublic of the Philippines is now demanding the payment
of the account. Justice of Peace dismisses the case on the ground ofprescription. CA rendered a decision ordering
theappellant to pay the appellee.
Issues:

1. W/N the appellee has no cause of action against the appellant? YES (CREDIT RELATED)

Held: There is COA.

This contention has no merit. It is true that the Bank of Taiwan, Ltd. was the original creditor and the
transaction between the appellant and the Bank of Taiwan was a private contract of loan. However,
pursuant to the Trading with the Enemy Act, and Executive Order No. 9095 of the United States; and
under Vesting Order No. P-4, the properties of the Bank of Taiwan, Ltd. were vested in the United States
Government and the Republic of the Philippines, the assets of the Bank of Taiwan, Ltd. were transferred
to and vested in the Republic of the Philippines. The successive transfer of the rights over the loans in
question made the Republic of the Philippines the successor of the rights in said loans, thereby creating a
privity of contract between the appellee and the appellant. In defining the word "privy" this Court, in a
case, said:

The word "privy" denotes the idea of succession ... hence an assignee of a credit, and one
subrogated to it, etc. will be privies; in short, he who by succession is placed in the position of one
of those who contracted the judicial relation and executed the private document and appears to
be substituting him in the personal rights and obligation is a privy.

Appellants likewise maintain that there is no COA because the crops used as chattel mortgage were lost
or destroyed through enemy action; thus, his obligation to pay the loans was thereby extinguished.
UNTENABLE.

The obligation of the appellant under the five promissory notes was not to deliver the crops to be
harvested from his land. Rather, his obligation was to pay a generic thing the amount of money
representing the total sum of the five loans, with interest. "By a contract of (simple) loan, one of the
parties delivers to another ... money or other consumable thing upon the condition that the same amount
of the same kind and quality shall be paid." (Article 1933, Civil Code)

The chattel mortgage on the crops growing on appellant's land simply stood as a security.